Dare We Say Recovery?

While consumer confidence appears to be coming back and homes sales are trending upwards, there's still a glut of homes and foreclosures keep edging higher.

For the sanguine out there, delinquencies are starting to level off and other conditions are pointing toward a longer-term recovery. For the less hopeful, the positive signs are feeding a "virtual recovery" instead of one that's sustainable.

The push-and-pull of these two views fueled the dialogue at the European Securitization Forum's/Information Management Network's Global ABS conference, where Nora Colomer found plenty to write about. Panelists at the conference said that while the leading indicators might point to some progress, there is very little in terms of hard data to confirm that the market is on an upturn. Participants also questioned whether government intervention is a panacea or is hampering private sector participation.

On the domestic front, Gabrielle Stein asks the question that's gnawed at many of us since the crisis blew up: Is a housing market recovery in sight?

To be sure, the persistence of low interest rates has stimulated refinancing and home sales, which have received an extra boost from falling prices. Recent results from the Conference Board Consumer Confidence Index also showed that consumers are feeling a little better about their employment prospects. But it might be too soon to celebrate. Kevin Cavin from FTN Financial warns that the delinquency pipeline is crammed, with 60+ day delinquencies soaring to an all-time high. "A lot of these properties will have to be liquidated before the housing market will truly recover," he said.

ASR's resident columnist Bill Berliner casts the market in a more positive light. He looks closely at data on newly delinquent loans, which have leveled off and even declined in certain cases, specifically zeroing in on subprime. Subprime loans in securitized pools, Bill said, might be benefiting from the phenomenon of the weaker borrowers being removed from loan pools through foreclosure. The key question is how quickly this trend carries over to the prime and Alt-A sectors.

There can't be talk of recovery without the mention of the hand that's feeding us - the government. In its contributed piece, Fitch Ratings goes through the different facilities that the government has set up to help ABCP. Although these facilities have had a minimal effect on credit ratings, Fitch said that they have provided the sector with much-needed liquidity and price stability.

And of course, there's the market's bread-and-butter: TALF. Nora discusses how this program revitalized the dormant CMBS market, encouraging the origination of new commercial mortgages and spurring securitization. However, the program isn't expected to generate the volumes seen in 2006 and 2007. Investors also have to overcome their concerns about CMBS delinquencies and default rates for TALF to truly make a splash.

The European Central Bank will kick off its covered bond purchase scheme in July. In her story, Nora credits the "forward-looking" program for giving the market something to cheer about.

Finally, Felipe Ossa revisits Kazakhstan - a country that's become a thorn in the side of EM players. In particular, he writes about Alliance Bank, an originator that would be raising hackles by talking about restructuring DPR debt if it weren't for the fact that flows to those deals have dried up anyway. Felipe also skims through the more positive moments in May for Latin America. An RFP, an imminent pricing and an upgrade of a cross-border program indicate that we may indeed be turning a corner.